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For decades, third-party administrators have been an invaluable resource for life and annuity companies to reduce costs. In recent years TPAs have been offering new capabilities, and though they remain a stalwart resource for cost-takeout, but a new model is emerging whereby the TPA can be far more of an extension of an insurer’s supply chain, becoming a partner in business agility in support of growth initiatives. This was the theme of a March 26, 2024 webcast presented by Insurance Innovation Reporter and sponsored by Sutherland (Rochester, N.Y.).
“Now the TPA can actually help introduce new products,” commented Karen Monks, Principal Analyst, Celent (Boston) in her overview during the webinar. “They can introduce new channels—whether it’s moving from captive to independent agents, BGAs, IMO’s, even banks. Maybe moving to maybe DTC. And all of that because the TPAs are starting to move past what was just the technologies that they needed to handle closed blocks of business, and into more advanced technologies that can create digital capabilities. They’ve got micro services, they’ve got integrations they’ve got everything that creates an ecosystem that—not all—but some that are allowing an insurer to do much more with the TPA than they did in the past.”
Along with Karen Monks of Celent, the other panelists were Nicole Comstock, Vice President Service & Claims, Ameritas Life Insurance Corp; Karen Monks, Principal Analyst, Celent; Laurel Jordan, TPA Insurance Officer & Solutions Lead, Sutherland; and Anshu Biswas, Head of Life and Benefits, Sutherland. Anthony O’Donnell, editor of IIR moderated the discussion.
Monks’ comment above followed an account of the history of the TPA reaching back to 1973, when health & benefits providers and workers’ comp insurers sought to go beyond traditional business process outsourcing to a “lift and shift” of areas such as claims. Around 2008, economic conditions drove life insurers TPAs more heavily, as well as selling off closed books of business to private equity companies—who would turn to TPAs to administer them.
Insurers very much continue to make decisions about TPA partnerships based on their more traditional closed-book, cost-reduction capabilities, noted Ameritas VP Comstock. “Conversely, carriers sometimes struggle to bring new products to market quickly, especially combined with the more modern experience that doesn’t derail other strategic initiatives that they’re trying to work on,” she said. “Carriers will continue to spend their time and focus on the strengths of their existing relationships, while possibly segregating this new distribution experience for a while. Over time you may also see carriers begin to migrate existing products to that type of experience.
Early in the current decade, Celent research showed that approaching 60 percent of TPAs are doing closed-book work, but there is a growing trend of TPAs to handle new, strategic blocks of business. “Of the 14 or 15 TPAs I’m looking at, half to three-quarters are working toward opportunities to administer new-business and new-channel opportunities.”
The Future of the TPA: Growth, Growth, Growth
Cost takeout is a given in the carrier/TPA relationship—a foundational element of any engagement, noted Sutherland’s Anshu Biswas. “However, what the carriers are increasingly seeking, and what we have prepared ourselves for during the last several years, is for the TPA to be their growth partner,” he elaborated. “The question is how can I help the carriers to sometimes—for lack of better word—experiment so that I can quickly bring a product to market and do sales for them. If it clicks, fine, learn from it go back create it right and then come back with a product and redefined product.”
“That agility is what we are bringing to the table, and that’s what the carriers are looking for,” Biswas continued. “So, I need to operate where I do not forget the old traditional TPA, because carriers need that that cost takeout and predictable cost run. That has got refined over the years, over the decades. That’s got extremely refined, with a very transparent commercial model. But the value that we bring is enabling growth, growth, growth. That’s where we believe the future of the TPA is.”
Sutherland’s Laurel Jordan stressed the appetite on the part of carriers for help in bringing new types of products, often with complex features, to market quickly and in an agile manner. “We offer them help in that growth ambition with both our advanced core administration technology and our own licensed agents,” she said.
Another necessary aspect of the evolving TPA/carrier relationship is a shift from service provider/customer to partners operating transparently in a shared endeavor, Jordan added. “Transparency is the biggest thing carriers are looking for because all the providers are promising similar capabilities and promises,” she said.
“In the old world, the TPA functioned ‘over the wall’—it had its own process, it’s own way of doing things,” added Biswas. “We look at ourselves as an extension of the carrier; we define a process which gels with the carrier’s ethos.”
Transparent Partnership
Transparency begins with clear expectations on the part of both parties, suggested Celent’s Monks. An insurer needs to be clear about what it’s trying to accomplish, and what capabilities are necessary to accomplish it. “What’s important is creating an RFP,” she said. “You’ll look into not only whether a TPA can do certain processes, but what technologies they’ll use for them.
Ameritas’ Comstock emphasized the long-term nature of the engagements. “Nobody enters into these relationships to be dishonest about things, but you’re talking over a course of weeks about what your end state is going to be and everybody’s naturally talking ‘blue sky’,” she said.
In order to achieve the scale and other benefits of the TPA relationship, carriers have to take responsibility for engaging in the kind of partnership that ensures both sides are working toward common goals, Comstock suggested. However, they also have to affirm the TPA’s approach to process. “The idea that we can completely fuse culture is a great, but difficult to pull off. In order for that to be achieved at any kind of scale, the critical TPA processes must be as similar across all of their carrier partners as possible,” she cautioned.
Comstock, who has over 25 years, with experience leading operations on the carrier, TPA, and software provider sides of the business, identified three necessary conditions for success in a carrier/TPA relationship:
- Operational leaders must be involved in the earliest stages of any engagement;
- Responsibility for governance and delivery of service levels should be established at the beginning;
- Carrier executives must lead the engagement by influence, not control.
By bringing operational leaders in at the beginning and by ensuring transparency on the part of the TPA, it will be easier to address instances when business processes don’t perfectly align, Comstock advised. “That leads to fewer surprises,” she said. “You don’t want your teams to have to take time out to figure out how to put solutions together after you’re live—those things should have been discussed before you’re actually in the trenches.”
The new model of a TPA includes becoming an extension of a carrier, and bringing new capabilities, including those they may not have but need for strategic product launch and administration, suggested Sutherland’s Biswas. Among those are not only modern policy administration technology, but customer experience capabilities that include automation.
“Awesome Customer experience has been ignored to some extent in the life and annuity space,” noted Biswas. “The retail and technology sectors have taken customer service to different level altogether; we have asked: ‘Why can’t we be in the same league?’”
“For us, CX automation does not mean that you make a hard push for your end customers to go to a portal or mobile app. Rather, what we are building is a solution where we’re saying, “Let me hand-hold you when you’re filing a claim, walk you through the process, connect with that human,’ and then literally help them go and take the digital channel in part to file it see their progress. That’s our idea of CX automation: a blend of a human contact the voice and handling into the digital channel.”
“Whe we designed our Sutherland TPA Edge offering, we saw automation as a given,” Biswas added. “That is the top thing in our mind: How can we digitally enable our carriers and accelerate them in the path of automation. And when we say automation, it is end-to-end automation.”
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